What are the characteristics of a good regulatory system? It must be clear and unambiguous. It should also be clear about what activities are allowed and prohibited as well as the consequences for violating them. The regulator, which is usually a State agency, should be able to detect violations and bring those who are found to their attention to court.
The ongoing analysis of the law to regulate cryptocurrency is focusing too much on the first and not enough on the second. If the law prohibits cryptocurrency transactions and someone holds a few Bitcoins and sells them in private transactions, it is unlikely that the government will find out. Is there a way to find out if two traders made private transactions using their personal wallets even if they are allowed within the regulatory framework? You will have a lot of success taxing this transaction.
Imagine a case where a cryptocurrency crime has been committed and that the accused is taken into custody with the proceeds (stolen money). We saw that often the police lacks the expertise and resources to make sure the coins seized are taken into custody.
Imagine that cybercriminals demand ransom in cryptocurrency for hacking into the IT systems of a hospital or electricity company. It will not be an excuse that Bitcoins have been banned in India. The victim will have to make arrangements, most likely at a high cost.
A regulatory framework that only addresses the permissible activities is not useful. Even a complete ban, which would pass the test of clarity, would not be meaningful if the State doesn’t have the expertise or the means to enforce it.
What are the characteristics of a good regulatory system? It must be clear and unambiguous. It should also be clear about what activities are allowed and prohibited as well as the consequences for violating them. The regulator, which is usually a State agency, should be able to detect violations and bring those who are found to their attention to court.
The ongoing analysis of the law to regulate cryptocurrency is focusing too much on the first and not enough on the second. If the law prohibits cryptocurrency transactions and someone holds a few Bitcoins and sells them in private transactions, it is unlikely that the government will find out. Is there a way to find out if two traders made private transactions using their personal wallets even if they are allowed within the regulatory framework? You will have a lot of success taxing this transaction.
Imagine a case where a cryptocurrency crime has been committed and that the accused is taken into custody with the proceeds (stolen money). We saw that often the police lacks the expertise and resources to make sure the coins seized are taken into custody.
Imagine that cybercriminals demand ransom in cryptocurrency for hacking into the IT systems of a hospital or electricity company. It will not be an excuse that Bitcoins have been banned in India. The victim will have to make arrangements, most likely at a high cost.
A regulatory framework that only addresses the permissible activities is not useful. Even a complete ban, which would pass the test of clarity, would not be meaningful if the State doesn’t have the expertise or the means to enforce it.